Major oil companies expected to report, defend big profits

Rising gas prices leave consumers disgruntled.

By Brett Clanton / brett.clanton@chron.com

Updated 9:04 pm, Sunday, July 24, 2011

HOUSTON — Big Oil is expected to report another round of big profits this week after sharply higher crude prices during the second quarter helped boost their bottom lines, but few Americans are likely to celebrate the achievement.

With the economy still in neutral and pump prices still high, the news for many will be about as welcome as a flat tire — and some critics already are preparing to pounce.

But major oil producers will have the chance to discuss and, if necessary, defend the results when they release quarterly financial reports in coming days.

First up is BP on Tuesday, followed by ConocoPhillips on Wednesday, Exxon Mobil Corp. and Royal Dutch Shell on Thursday and Chevron Corp. on Friday.

Most Popular

The reports arrive as the world's largest oil companies continue to see business conditions improve around the world following the global economic downturn and after nearly all the firms also posted gains in the first three months of the year.

Analysts said companies likely received the biggest boost in the April-June period from higher oil prices, which averaged $102.34 a barrel, up from $78.05 a barrel in the second quarter of 2010.

Oil prices have surged amid political unrest in the Middle East, a weak U.S. dollar and rising global energy demand with the economic recovery, a trend that also has helped lift refining profits.

“I think it's fair to say the numbers are going to be very healthy,” said Allen Brooks, managing director of Parks Paton Hoepfl & Brown, a Houston investment bank.

The gains come at a time when many Americans still are struggling to get back on their feet after the worst economic downturn since the Great Depression and as gasoline prices remain high.

During the second quarter, pump prices nationwide averaged $3.81 a gallon, a dollar higher than the average in the second quarter of 2010, according to the U.S. Energy Information Administration. On Friday, the U.S. average stood at $3.70 a gallon, AAA said.

“We expect Big Oil to be rolling in huge second-quarter profits with money that came out of families' wallets from higher gasoline prices,” said Daniel Weiss, a senior fellow at the left-leaning Center for American Progress in Washington.

The nonprofit group plans to release a fact sheet today showing the five biggest oil companies in the U.S. posted profits of more than $900 billion from 2001 to 2010 and continue to plow huge amounts into stock buybacks that benefit stockholders rather than into their operations.

The oil and gas industry is readying its defense. The American Petroleum Institute, the industry's top lobbying group, has scheduled a conference call with journalists today to discuss “the vital role the oil and natural gas industry's capital spending plays in the U.S. economy by creating jobs, funding retirement accounts and generating revenues for our governments.”

Industry officials have tried to explain that, while major oil companies may benefit from high oil prices, they don't cause them. Rather, prices reflect a confluence of political and economic trends at any given time. And profits from sales of fuels are a small part of earnings, they say.

But the explanations have done little to convince consumers or placate lawmakers in Washington, who almost annually accuse the industry of profiteering while U.S. drivers get squeezed.

One bit of solace for them: analysts believe higher second-quarter earnings probably won't do much to drive oil company stock prices higher.